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percent for a three-pound shipment, and 7. 34 percent for a four-pound shipment. Hempstead’s calculations assume that UPS maintains its minimum charges and discounts its rates, fuel surcharges, and residential delivery charges each by 50 percent.

“These are big savings and at least worth
a look for a shipper,” especially those look-
ing to compete against a company like
Amazon, Hempstead says. Hempstead,
normally not given to hyperbole and hard-
ly a USPS advocate, says the new strategy is
“brilliant.”
FedEx’s and UPS’s competitive options
are limited, according to Jindel of SJ
Consulting. One counter-strategy would be
to trumpet their stellar 97 to 98 percent on-
time performances and promote the
money-back guarantees that accompany
their service offerings, he says. However,
the companies may not want to highlight
the feature because it raises the specter of
shipment losses and because “no one pays
much attention anyway” to the money-
back guarantees, although the language is
embedded in the shipper-carrier contracts.

As solid as the strategy appears to play, the devil, as always, is in the implementation details. USPS will need to sync its pickups to accommodate the production schedules of businesses functioning in an increasingly demanding world. Schoeman says that although USPS has the tools and flexibility to make it work, it is not there yet. It remains to be seen if USPS “can execute on a consistent pattern of pickups,” he says.

PERCEPTION PROBLEMS

This is the latest service change in Priority Mail since it was launched in 1968. For years, it was marketed as a two-day delivery service. However, in the 1990s, USPS began promoting it as a two- to three-day delivery service after studies showed that an uncomfortably large number of shipments were not delivered in two days.

That move may have created more prob-
lems than it solved. By publicly hedging its
bets on delivery windows, USPS left the
impression that it lacked visibility into its
shipping pipeline. “By setting a two- to
three-day delivery range, USPS conveyed to
people that it didn’t really know” about the
status of its packages, says Schoeman. That
has created uncertainty among
users of all stripes. It’s a perception
that must be addressed and elimi-
nated if USPS is to capture the ship-
ping dollars of e-merchants and
customers that need to know pre-
cisely when their packages will
arrive, analysts say.

Ironically, the analysts who follow the agency said it always had enough data to know when goods would be delivered. “They have great visibility,” says Jindel of SJ Consulting. “They just have to share it with the marketplace.”

ADDING TO THE TOP LINE

USPS executives estimate the
revamped service will add $500 mil-
lion a year in revenue to an organi-
zation that generates about $63 bil-
lion annually. It is also likely to
accelerate the momentum in USPS’s
“shipping and packages” segment,
of which Priority Mail is a part. In a
report filed with the Postal
Regulatory Commission on its fiscal
third quarter (which ended June
30), USPS said revenue for “ship-
ping and packages” increased 8. 8
percent to nearly $3 billion. That
accounts for slightly less than 20
percent of all revenue for the quar-
ter. Volumes for the segment grew
7. 1 percent from the same period a
year ago, USPS said.
However, USPS knows that the
gains in shipping services cannot
offset the declines in first-class mail
revenue and volume caused by the
growth of digital mailing options.
In its fiscal third-quarter filing, it
said that revenues from the ship-
ping and package segment “would
have to grow at a substantially high-
er rate in order to replace the con-
tribution of first-class mail,” which
is its most profitable segment.